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Flashcards in Accounting Principles Deck (22):
1

What is the ASX?

Australian Securities Exchange

2

What is the IASB?

International Accounting standards board

3

What are the fundamental characteristics in the conceptual framework?

- Relevance
- Materiality
- Faithful representation

4

What is relevance in the conceptual framework?

Relevance is the information being used has the quality to form predictions and confirm/correct past evaluations.

5

What is Materiality?

The materiality of things in the business to affect users decision

6

What's an example of materiality?

A refrigerator used in a small business would mean a lot but one in a large business dealing in millions wouldn't have much impact on decisions made.

7

What is faithful representation?

Information free of material error.

8

What are the five elements used in financial statements?

- Asset
- Liability
- Owners Equity
- Expense
- Revenue

9

What is the definition of an asset?

A resource that is controlled due to past events and that holds future benefits to the business.

10

What is the definition of a Liability?

A present obligation rising from past events which will settle with an outflow of resources from the business.

11

What is the definition of Equity?

The profit from taking the total liabilities from the total assets. Profits go to the owner.

12

What is the definition of revenue?

Increases in business profits due to the increasing of assets or decreasing of liabilities. This excludes owners investments.

13

Define expenses.

Decreases in profits during accounting period that reduces assets or increases liabilities.

14

Give examples of assets.

Cash on hand, accounts receivable, inventory, vehicle, bank.

15

Examples of liabilities

Accounts payable, mortgage, loans, bank overdraft.

16

Examples of owners equity

Capital, retained profit, drawings.

17

Examples of expenses

Wages, electricity, rent, cost of goods sold, insurance, interest, rates

18

Examples of revenue

Revenue from ?, sales, interest received, collision revenue

19

How do you get a net profit or net loss?

Revenue is greater that expenses that it's a net profit but if The expenses exceed the revenue it's a net loss.

20

What is accrual accounting?

Transactions and events are recorded when they occur. Not when cash is received.

21

What are fundamental qualitative characteristics?

- Relevance
- Timeliness
- Faithful representation
- Economic substance

22

How do you enhance qualitative characteristics?

- comparability
- consistency
- verifiability
- understandability
- materiality
- cost vs benefit